Recent Changes in Health Policy for Low-Income People in New York

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Note: This report is available in its entirety in the Portable Document Format (PDF).

About the Series

This state update is a product of Assessing the New Federalism, a multiyear project to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being.

Recent Changes in Health Policy for Low-Income People received special funding from the Robert Wood Johnson Foundation as part of the Urban Institute's Assessing the New Federalism project. The project received additional financial support from The Annie E. Casey Foundation, the W. K. Kellogg Foundation, The Henry J. Kaiser Family Foundation, The Ford Foundation, The David and Lucile Packard Foundation, The John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, the McKnight Foundation, The Commonwealth Fund, the Stuart Foundation, the Weingart Foundation, the Fund for New Jersey, The Lynde and Harry Bradley Foundation, the Joyce Foundation, and The Rockefeller Foundation.

This state update was prepared for the Assessing the New Federalism project. The views expressed are those of the authors and do not necessarily reflect those of the Urban Institute, its board, its sponsors, or other authors in the series.

Overview

New York has a tradition of funding a comprehensive health care system for its low-income population. By almost any measure—eligibility, provider payment, services covered—the state operates one of the most comprehensive Medicaid programs in the country, as well as a generous State Children's Health Insurance Program (SCHIP). In addition, New York has in place some of the most far-reaching small group and individual insurance reforms. Further, it has a number of well-funded subsidy programs to help support safety net providers.

With a special focus on the low-income population, this report examines the major health issues New York has dealt with in the period between 1997 and 2001. During this period, states were given new opportunities in health policy for low-income people. Many developments increased state flexibility, including welfare reform, new funding for children's health insurance coverage under SCHIP, and repeal of federal minimum standards for nursing home and hospital reimbursement that had constrained states' control over Medicaid payments. Fiscal capacity also rose—from booming revenues during the long economic expansion of the 1990s and from new tobacco settlement funds.

At the same time, states were put under new policy formulation and revenue pressures. These arose from recent federal economizing under Medicaid and Medicare, notably including cuts in safety net support, which was believed to have been abused by some states; political pressures for state tax cuts; and, starting in 2001, an economic slowdown and fears of recession. Although New York's fiscal picture was optimistic in early 2001, the outlook is now not so bright, especially in the wake of the September 11 terrorist attacks on the World Trade Center in New York City.

To examine how New York has responded to federal constraints and state flexibility during the last half decade, this case study examines state priority setting and program operations in health policy affecting the low-income population. The study reveals that during the late 1990s, New York's policy attention on health care issues has been principally aimed at addressing the state's large and growing uninsured population. The centerpiece of New York's recent health policy is the Health Care Reform Act (HCRA) of 2000, a sweeping piece of legislation that addresses virtually all dimensions of the state's health care system—from indigent care to graduate medical education to poison control. In addition to reauthorizing a number of established programs, HCRA 2000 contained funding for several new programs. Perhaps most important were the provisions to expand health insurance coverage to uninsured adults through two new initiatives —Family Health Plus and Healthy New York. Family Health Plus, when implemented, will expand coverage through Medicaid whereas Healthy New York provides state-subsidized health coverage for small employers and for individual workers. Together, these initiatives are designed to extend coverage to about one million New Yorkers at a cost to the state of nearly $500 million over three and one-half years. Both Family Health Plus and Healthy New York were seen as building upon Child Health Plus—New York's Title XXI SCHIP initiative—one of the most politically popular health programs in the state. Another important HCRA 2000 provision was the expansion of state-sponsored prescription drug coverage for low-income seniors, the Elderly Pharmaceutical Insurance Coverage (EPIC) program. It is expected that the expansion will boost enrollment from roughly 120,000 to 200,000 seniors.

In addition to the force of political will, New York was able to undertake these progressive HCRA reforms because of its booming economy, which, as of early 2001, was in strong shape. Further, New York began receiving its tobacco settlement money in 2000, part of which went to fund HCRA 2000 initiatives. Monies from a cigarette tax increase also helped finance some of the HCRA programs.

In addition to HCRA 2000, this study found that the state's rollout of its Partnership Plan Section 1115 Medicaid waiver program is also high on the agenda of policymakers and advocates. New York's Partnership Plan, which calls for the enrollment of more than 2 million Medicaid recipients into managed care, has been implemented more slowly than initially anticipated. As of this writing, only about 700,000 of the expected 2 million individuals are enrolled in the waiver program.

Given the recent passage of the HCRA 2000, only a few health policy matters are on the table in 2001. However, health care is clearly on the minds of New York policymakers. Among other issues are how to deal with the labor shortage that is affecting hospitals, nursing homes, home health agencies, and other home care providers statewide. There is also concern about how to handle the enrollment "churn" in the Medicaid and Child Health Plus populations and improve retention. Another issue is the implementation of the HCRA 2000 health insurance programs—Healthy New York and Family Health Plus. After considerable back and forth between the state and federal officials, New York was granted a federal waiver on May 30, 2001, to implement Family Health Plus—nearly a year after submitting the waiver application. The program was expected to become operational in October 2001. Although Healthy New York was implemented in January 2001, program enrollment has been very limited.

Besides program implementation delays and relatively slow enrollment into Healthy New York and the Partnership Plan, New York, like many other states, is facing projected increases in Medicaid spending: In 2001, Medicaid expenditures are expected to increase 6 percent, about three times the annual growth rate over the period from 1995 to 2000. Owing to the strength of New York's fiscal situation, policymakers are not generally concerned about the spending jump. However, given the economic downturn and financial impact of the September 11 attacks, this sentiment may quickly change. A continued rise in Medicaid spending coupled with the economic downturn is likely to put considerable pressure on the state's budget, as Medicaid is by far the single largest budget item, accounting for 32 percent of New York's total spending in 2000.

This report suggests that New York has continued its longstanding practice of pushing the envelope of its health care system to improve care for its low-income residents. However, considerable work is needed to translate the many new initiatives into successful programs. In particular, the state will be faced with the important challenge of enrolling and retaining eligible populations in the new insurance coverage programs. If these programs do not meet their enrollment goals, New York and its providers will continue to confront the pressures of a sizeable uninsured population (estimated at more than 2 million nonelderly individuals in 1999). At the same time, given the September 11, 2001, terrorist attacks, which dealt a severe blow to state finances, and the general slowing of the nation's economy, budget pressures from rising Medicaid spending could raise some very tough issues for New York policymakers.

Note: This report is available in its entirety in the Portable Document Format (PDF).

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Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.